ACCA Strategic Professional · Strategic Business Leader · Management and internal control systems
Tamsin Logistics has grown quickly. Directors review monthly accounts but have no formal process to identify new risks, such as cyber attacks on its new tracking platform. Which element of the internal control framework is most clearly deficient?
The deficient component is risk assessment. The company has no formal process to identify and evaluate emerging risks such as cyber threats to its new platform, so recommendations should include a regular risk review, a risk register and board-level ownership of risk.
- AControl activities, because there are no approval limits
- BMonitoring, because internal audit does not exist
- CRisk assessment, because the company has no process to identify and evaluate emerging risksCorrect
- DInformation and communication, because monthly accounts are produced
Explanation
The key failing is the lack of any process to identify and analyse new risks as the business changes. This is the risk assessment component of an internal control framework such as COSO. Monthly accounts show that some information and monitoring exists, and the case says nothing about approval limits.
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